Australia Agriculture and Farmland Investing Guide
the agriculture and the farmland investing in Australia. The guide covers: the farmland as the asset class (the "agricultural land investment") — the Australian farmland has delivered the "consistent annual returns of 8% to 12%" (the "capital growth of 5% to 8% plus the rental yield of 3% to 4%"); the "total agricultural land value in Australia" exceeds $300 billion; the "farmland volatility" is lower than the "Australian residential property" and the "ASX 200 equities"; the farmland investment provides: (a) the "capital growth" (the "land appreciation from the productivity improvements and the commodity price cycles"), (b) the "income yield" (the "lease payments from the farmers or the cropping returns"), (c) the "inflation hedge" (the "food demand is the inelastic — the farmland values rise with the inflation"); the agritech innovation (the "technology in the agriculture sector") — the "agritech" companies in Australia include: (a) the "precision agriculture" (the "satellite imagery, the soil sensors, the variable rate application"), (b) the "robotics and the automation" (the "autonomous tractors, the robotic milking, the drone monitoring"), (c) the "biotechnology" (the "genetic improvement, the drought-resistant crops, the livestock genomics"), (d) the "supply chain technology" (the "blockchain traceability, the digital marketplaces, the logistics optimisation"); the ASX-listed agritech companies include: the "Ridley Corporation — the RIC" (the "animal nutrition"), the "Elders — the ELD" (the "rural services"), the "Nufarm — the NUF" (the "crop protection"); the water rights (the "water entitlements and the allocations") — the "water rights" in Australia are the "tradeable commodities" — the "permanent water entitlements" (the "ownership of the water right") and the "temporary water allocations" (the "annual allocation from the entitlement"); the water market is most active in the "Murray-Darling Basin" (the "NSW, the Victoria, the South Australia"); the water rights are the "CGT assets" — the "CGT applies on the sale of the permanent water entitlements".
Agriculture Investment Structures
- Direct farmland ownership: The "direct ownership" of the farmland — the investor buys the "agricultural property" and leases it to the "farmer" (the "leaseback arrangement" or the "share farming agreement"). The direct ownership provides the "capital appreciation" and the "rental income". The "minimum investment" is $1 million to $5 million for the productive agricultural land.
- Agricultural managed investment schemes (MIS): The "MIS" — the "pooled investment structures" where the investors contribute the capital and the "professional manager" operates the agricultural enterprise (the "forestry, the horticulture, the livestock"). The "tax-effective" MIS structures (the "upfront deductions for the establishment costs") are restricted under the "Non-Forestry MIS rules" after the 2016 changes.
- ASX-listed agri-companies: The listed agri-companies include: the "Graincorp — the GNC" (the "grain storage and the marketing"), the "Australian Agricultural Company — the AAC" (the "cattle production"), the "Bega Cheese — the BGA" (the "dairy processing"), the "Tassal Group — the TGR" (the "salmon farming"). The investor can gain the "diversified exposure" through the "agriculture ETFs" (the "ROBO Global Robotics and Automation Index ETF" for the agritech).
For the primary production tax concessions and the income averaging, see our Primary Production Guide →.
Tax Considerations for Agriculture Investments
- Primary production tax concessions: The "primary producer" (the "farmer, the grazier, the horticulturist") can access the "income averaging" (the "average of the last 5 years of the taxable income" — the "smoothing of the tax liability"), the "immediate deduction for the fencing, the water facilities and the fodder storage" (the "FWS — the Fencing, the Water, the Storage"), the "instant asset write-off" for the "eligible depreciating assets".
- CGT on the farmland: The "capital gain" on the sale of the farmland is subject to the "CGT". The "50% CGT discount" applies for the "individual holding for more than 12 months". The "CGT small business concessions" (the "15-year exemption, the 50% active asset reduction, the retirement exemption, the rollover") may apply if the farmland is the "active asset" and the "net asset value is below $6 million".
- Carbon farming and the biodiversity credits: The "carbon farming" — the "Australian Carbon Credit Units (the ACCUs)" from the "vegetation projects, the soil carbon projects, the savanna burning" — the ACCUs can be sold on the "secondary market" (the "$30 to $50 per ACCU") and the "income is the assessable". The "biodiversity credits" are the "emerging market" — the "NSW Biodiversity Offsets Scheme" credits.
For the CGT small business concessions and the eligibility, see our Small Business Concessions Guide →.